2006 Annual Report

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3 Luxury Lodging, which includes The Ritz-Carlton and Bulgari Hotels & Resorts brands worldwide; 3 Timeshare, which includes the development, marketing, operation and sale of timeshare, fractional and whole ownership properties under the Marriott Vacation Club, The Ritz-Carlton Club, Grand Residences by Marriott and Horizons by Marriott Vacation Club brands worldwide; and 3 Synthetic Fuel, which includes our interest in the operation of coal-based synthetic fuel production facilities. In addition to the segments above, in 2002 we announced our intent to sell, and subsequently did sell, our Senior Living Services business segment and exited our Distribution Services business segment. In 2006, the company analyzed its internal reporting process and implemented changes in the fourth quarter that were designed to improve efficiency. As part of this process, we evaluated the impact on segment reporting and made certain changes that were in accordance with U.S. generally accepted accounting principles. These reporting changes are in conformity with the requirements of FAS No. 131,“Disclosures about Segments of an Enterprise and Related Information,” and will better enable investors to view the Company the way management views it. Accordingly, we now report six operating segments as compared to five before the change and indirect administrative expenses are no longer allocated to our segments. Senior management now allocates resources and assesses performance based on the six operating segments. The revised segment reporting is reflected throughout this report for all periods presented. Historical figures are presented in a manner that is consistent with the revised segment reporting. We evaluate the performance of our segments based primarily on the results of the segment without allocating corporate expenses, interest expense or indirect general, administrative and other expenses. With the exception of the Synthetic Fuel segment, we do not allocate income taxes or interest income to our segments. As note sales are an integral part of the Timeshare segment, we include note sale gains in our Timeshare segment results, and we allocate other gains and losses as well as equity earnings or losses from our joint ventures and divisional general, administrative and other expenses to each of our segments. “Other unallocated corporate” represents that portion of our revenues, general, administrative and other expenses, equity in earnings or losses, and other gains or losses that are not allocable to our segments. We have aggregated the brands presented within our North American Full-Service, North American Limited-Service, International and Luxury segments considering their similar economic characteristics, types of customers, distribution channels, the regulatory business environment of the brands and operations within each segment and our organizational structure and management reporting structure. 60 | MARRIOTT INTERNATIONAL, INC. 2006 Revenues ($ in millions) 2006 2005 2004 North American Full-Service Segment North American Limited-Service $ 5,196 $ 5,116 $ 4,691 Segment 2,060 1,886 1,673 International Segment 1,411 1,017 604 Luxury Segment 1,423 1,333 1,263 Timeshare Segment 1,840 1,721 1,502 Total Lodging 11,930 11,073 9,733 Other unallocated corporate 65 56 45 Synthetic Fuel Segment 165 421 321 Income from Continuing Operations $12,160 $11,550 $10,099 ($ in millions) 2006 2005 2004 North American Full-Service Segment North American Limited-Service $ 455 $ 349 $ 337 Segment 380 303 233 International Segment 237 133 109 Luxury Segment 63 45 35 Timeshare Segment 280 271 203 Total Lodging financial results 1,415 1,101 917 Other unallocated corporate (251) (219) (220) Synthetic Fuel Segment (after-tax) Interest income, provision for loan losses and interest expense (excluding the Synthetic 5 125 107 Fuel Segment) Income taxes (excluding the (72) (55) 55 Synthetic Fuel Segment) (380) (284) (265) Equity in Earnings (Losses) of Equity Method Investees $ 717 $ 668 $ 594 ($ in millions) 2006 2005 2004 North American Full-Service Segment North American Limited-Service $2 $21 $ 8 Segment — (6) (17) International Segment — 20 5 Luxury Segment (2) (1) (3) Timeshare Segment (2) 1 (7) Total Lodging (2) 35 (14) Other unallocated corporate 5 1 — Synthetic Fuel Segment — — (28) $3 $36 $(42)
Depreciation and Amortization ($ in millions) 2006 2005 2004 North American Full-Service Segment North American Limited-Service $ 24 $ 19 $ 26 Segment 24 24 21 International Segment 23 18 13 Luxury Segment 7 10 10 Timeshare Segment 39 46 49 Total Lodging 117 117 119 Other unallocated corporate 61 57 39 Synthetic Fuel Segment 10 10 8 Assets $188 $184 $166 ($ in millions) 2006 2005 2004 North American Full-Service Segment North American Limited-Service $1,104 $1,309 $1,270 Segment 565 613 1,058 International Segment 1,225 1,333 897 Luxury Segment 755 656 687 Timeshare Segment 2,560 2,454 2,321 Total Lodging 6,209 6,365 6,233 Other unallocated corporate 2,288 2,062 2,319 Synthetic Fuel Segment 91 103 116 Equity Method Investments $8,588 $8,530 $8,668 ($ in millions) 2006 2005 2004 North American Full-Service Segment North American Limited-Service $ 18 $ 21 $ 32 Segment 35 50 77 International Segment 73 119 84 Luxury Segment 17 18 4 Timeshare Segment 168 115 31 Total Lodging 311 323 228 Other unallocated corporate 21 26 21 $332 $349 $249 Goodwill ($ in millions) 2006 2005 2004 North American Full-Service Segment $406 $407 $407 North American Limited-Service Segment 72 72 72 International Segment 273 273 272 Luxury Segment 170 172 172 Total Lodging $921 $924 $923 Capital Expenditures ($ in millions) 2006 2005 2004 North American Full-Service Segment North American Limited-Service $ 75 $197 $ 56 Segment 38 10 18 International Segment 215 376 3 Luxury Segment 104 84 5 Timeshare Segment 28 27 38 Total Lodging 460 694 120 Other unallocated corporate 69 86 61 $529 $780 $181 Our tax provision of $286 million for 2006 includes: a tax benefit and tax credits of $94 million associated with our Synthetic Fuel segment; our tax provision of $94 million for 2005 includes a tax benefit and tax credits of $190 million associated with our Synthetic Fuel segment; and our tax provision of $100 million for 2004 includes a tax benefit and tax credits of $165 million associated with our Synthetic Fuel segment. Segment expenses include selling expenses directly related to the operations of the businesses, aggregating $600 million in 2006, $609 million in 2005 and $454 million in 2004. Approximately 90 percent, 90 percent and 94 percent for 2006, 2005, and 2004, respectively, of the selling expenses are related to our Timeshare segment. The consolidated financial statements include the following related to operations located outside the United States (which are predominately related to our International lodging segment): Revenues of $1,869 million in 2006, $1,388 million in 2005, and $972 million in 2004; Lodging financial results of $298 million in 2006 (28 percent from Asia, 30 percent from the Americas excluding the United States, 13 percent from the United Kingdom, 19 percent from Europe, 8 percent from the Middle East and Africa, and 2 percent from Australia), $178 million in 2005 and $163 million in 2004; and fixed assets of $684 million in 2006 and $574 million in 2005. Additionally, the “Assets held for sale” caption in our accompanying Consolidated Balance Sheet included fixed assets totaling $348 million and $376 million for year-end 2006 and year-end 2005, respectively, that were associated with properties located outside the United States. No individual country, other than the United States, constitutes a material portion of our revenues, financial results or fixed assets. MARRIOTT INTERNATIONAL, INC. 2006 | 61
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MARRIOTT INTERNATIONAL, INC. 2006 A
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Our Brands The Ritz-Carlton ® Hote
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As the brand catering to the “enj
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A Place to Achieve At Marriott, we
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A Place to Let Go For many, leisure
Page 11 and 12: To Our Shareholders J.W. MARRIOTT,
Page 13 and 14: Risk Factors FORWARD-LOOKING STATEM
Page 15 and 16: ownership could prevent potential c
Page 17 and 18: Management’s Discussion and Analy
Page 19 and 20: eceipt in 2005, of a $10 million te
Page 21 and 22: “Accounting for Real Estate Time-
Page 23 and 24: everage and other revenue, and new
Page 25 and 26: Comparable Company- Comparable Oper
Page 27 and 28: 2006 COMPARED TO 2005 Across our No
Page 29 and 30: increase in base management and inc
Page 31 and 32: The table below details the impact
Page 33 and 34: production, our synthetic fuel prod
Page 35 and 36: Dividends. In April 2006, our Board
Page 37 and 38: previously deferred and recognize t
Page 39 and 40: Consolidated Statement of Income Fi
Page 41 and 42: Consolidated Statement of Cash Flow
Page 43 and 44: Notes to Consolidated Financial Sta
Page 45 and 46: “Other long-term assets” line i
Page 47 and 48: FIN 48, only tax positions that mee
Page 49 and 50: 3 | INCOME TAXES See the “Future
Page 51 and 52: weighted average remaining term was
Page 53 and 54: 7 | PROPERTY AND EQUIPMENT ($ in mi
Page 55 and 56: 2004 Dispositions We sold two lodgi
Page 57 and 58: At year-end 2006, $1,123 million of
Page 59 and 60: the Series F Notes and Series G Not
Page 61: Audit of Employee Stock Ownership P
Page 65 and 66: JWM Family Enterprises, L.P. JWM Fa
Page 67 and 68: Selected Historical Financial Data
Page 69 and 70: Non-GAAP Financial Measure Reconcil
Page 71 and 72: Report of Independent Registered Pu
Page 73 and 74: Board of Directors [BACK ROW, LEFT
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2006 Annual Report

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